Information Systems Planning

Chapter 4
Information Systems Management In Practice 7E McNurlin & Sprague
PowerPoints prepared by Michael Matthew Visiting Lecturer, GACC, Macquarie University ± Sydney Australia

Chapter 4
‡ Systems planning, especially strategic systems planning, is becoming more difficult and more important at the same time. Technology is changing so fast that it is seems futile to plan for it, yet the dependence on this technology makes planning its effective use a matter of organizational life and death ‡ This lecture / chapter contrasts the traditional view of planning with the sense-and-respond approach of strategy-making, presenting seven IS planning techniques ‡ Case examples include Microsoft, Skandia Future Centers, Shell Oil, an automobile manufacturer, Cisco Systems, and Electric Power Research Institute
©2006 Barbara C. McNurlin. Published by Pearson Education. 4-2

Today¶s Lecture
‡ Introduction
± Types of planning ± Why is planning so difficult?

‡ The Changing World of Planning
± Traditional Strategy-Making ± Today¶s Sense-and-Respond Approach

©2006 Barbara C. McNurlin. Published by Pearson Education.

4-3

Today¶s Lecture cont.
‡ Seven Planning Techniques
± Stages of Growth ± Critical Success Factors ± Competitive Forces Model
‡ Five Forces Analysis of the Internet

± Value Chain Analysis ± E-Business Value Matrix ± Linkage Analysis Planning ± Scenario Planning
©2006 Barbara C. McNurlin. Published by Pearson Education. 4-4

Introduction
‡ IS management is becoming more difficult and more important at the same time:
± Technology changing so fast: ³Why bother?´ Vs. Most organizations¶ survival is dependant on technology ± How to resolve this apparent paradox?

‡ Good News = variety of approaches, tools and mechanisms available ‡ Bad News = no µbest¶ way to go about it
©2006 Barbara C. McNurlin. Published by Pearson Education. 4-5

‡ It is important to establish the appropriate mindset for planning: ± Some managers believe = ³determining what decisions to make in the future´ ± Better view = developing a view of the future that guides decision making today ± Subtle difference = µstrategy making¶ ‡ Strategy = stating the direction in which you want to go and how you intend to get there ± The result of strategy-making is a plan ©2006 Barbara C. McNurlin. 4-6 . Published by Pearson Education.Introduction cont.

4-7 . Published by Pearson Education.Why Planning Is So Difficult Types of Planning: ‡ Planning is usually defined in three forms. which correspond to the three planning µhorizons¶. McNurlin. (Figure 4-1) ± Strategic = 3-5 years ± Tactical = 1-2 years ± Operational 6 months ± 1 year ©2006 Barbara C.

Types of Planning ©2006 Barbara C. Published by Pearson Education. 4-8 . McNurlin.

Published by Pearson Education. ‡ Why Planning Is So Difficult?: ± Business Goals and Systems Plans Need to Align  Strategic systems plans need to align with business goals and support those objectives  Some believe = ³too sensitive´ = PROBLEMS  Fortunately = trend for CIOs to be part of senior management ± Technologies Are Rapidly Changing  How can you plan when information technologies are changing so rapidly ± Continuous planning? ± Old days of planning at µstart of year¶ = gone ± Advanced technology groups ©2006 Barbara C. McNurlin. 4-9 .Introduction cont.

Introduction cont. radical change Vs. ‡ Why Planning Is So Difficult cont. continuous  Planning culture ©2006 Barbara C. 4-10 .: ± Companies Need Portfolios Rather Than Projects  Evaluation on more than their individual merit ± How they fit into other projects and how they balance the portfolio of projects ± Infrastructure Development is Difficult to Fund  Despite everyone ³knowing infrastructure development is crucial´. Published by Pearson Education. bottom-up. it is extremely difficult to get funding just to develop or improve infrastructure  Often done under the auspices of a large application project ± Challenge = develop improved applications and improve infrastructure over time ± Responsibility Needs to be Joint  Business planning. not just a technology issue ± Other planning issues  Top-down Vs. McNurlin.

react to competitors etc. McNurlin. Business executives created a strategic business plan = where the business wanted to go IS executives created an IS strategic plan = how IT would support the business plan IT implementation plan created = describe exactly how the IS strategic plan would be implemented The future can be predicted Time is available to do these 3 parts IS supports and follows the business Top management knows best (broadest view of firm) Company = like an µArmy¶ 4-11 ‡ Assumptions: ± ± ± ± ± ©2006 Barbara C. how much time they have to plan.The Changing World of Planning ‡ ‡ Internet etc. . Published by Pearson Education. = µintroduced¶ speed into the business environment and transformed how people think about time. Traditional Strategy-Making: 1. 3. 2.

The Changing World of Planning ©2006 Barbara C. Published by Pearson Education. 4-12 . McNurlin.

eBay etc. . Published by Pearson Education.The Changing World of Planning cont. McNurlin.? ± Time is not available for the sequence ± IS does not JUST support the business anymore ‡ ‡ ‡ Figure 2-8 Inside out Vs. Amazon. outside in approach (Figure 4-3) Industrial era metaphor no longer always applies 4-13 ± Top management may not know best ± An organization is not like an army ©2006 Barbara C. ‡ Today. these assumptions no longer hold true: ± The future cannot be predicted ‡ Who predicted Internet. due to the Internet and other technological advances.

©2006 Barbara C. Published by Pearson Education. McNurlin. 4-14 .

©2006 Barbara C. Published by Pearson Education. 4-15 . McNurlin.

In the µInternet Age¶ = younger employees 4-16 ©2006 Barbara C. the way to move into the future is step by step using a sense-and-respond approach ± ± Sense a new opportunity and immediately respond via testing it via an experiment Myriad of small experiments (Figure 4-6) ± Formulate strategy closest to the action: ‡ ‡ ‡ Close contact with the market Employees who interact daily with customers. suppliers and partners Employees who are closest to the future should become prime strategists.Today¶s Sense-and-Response Approach ‡ If yesterday¶s assumptions no longer hold true. . what is taking the µold¶ approach¶s place?: ± Let Strategies Unfold Rather Than Plan Them: ‡ ‡ In times of fast paced change (like today!) this is risky When predictions are µrisky¶. McNurlin. Published by Pearson Education.

4-17 . McNurlin.The Changing World of Planning ©2006 Barbara C. Published by Pearson Education.

Multiplayer gaming Not all came from µtop management¶ e. Music. Cable modems. first server came from a µrebel¶ project Getting its fingers into every pie that might become important ± Missed some ± paid $$$ later 4-18 ©2006 Barbara C.MICROSOFT Case example: Sense and Respond Strategy-Making ‡ ‡ ‡ ‡ ‡ Abandoned proprietary network despite big $ when it did not capture enough customers Moved on to buying Internet Companies as well as aligning with Sun to promote Java Over time = moved into a variety of technologies: ± Web. Published by Pearson Education. Digital movies. Handheld OS. McNurlin.g. Video server. Cable news. .

others = not Combining senior wisdom with young people¶s entrepreneurship leads to a real powerhouse 4-19 ©2006 Barbara C. . Report) ‡ ‡ ³Garden´ = some of the projects are growing.SKANDIA FUTURE CENTERS Case example: Formulate Strategy Closest to the Action ‡ ‡ Incubator for testing ideas on IT. Published by Pearson Education. McNurlin. and networking for Skandia. social relationships. the large Swedish insurance company Different generations (3G: 25+. 45+) collaborate on µon-the-edge¶ projects ± In order to talk = focus on questions (= dialog) rather than answers (= debate) ± Presented as µplays¶ (Vs. 35+.

what is taking the µold¶ approach¶s place? cont. 4-20 . McNurlin.Today¶s Sense-and-Response Approach cont. Published by Pearson Education.: ‡ Guide Strategy-Making with a µStrategic Envelope¶: ± ± ± Having a myriad of potential corporate strategies being tested in parallel could lead to anarchy without a central guiding mechanism Top management set the parameters for the experiments (= a µstrategic envelope¶). and then continually manage that context Need to meet often to discuss: ‡ ‡ ‡ Shifts in the marketplace How well each of the experiments is proceeding Gaining µfollowership¶ or showing waning interest? ©2006 Barbara C. If yesterday¶s assumptions no longer hold true.

so that there was not complete chaos 4-21 ©2006 Barbara C. µhot seats¶. . Published by Pearson Education. Set aside 50% of his time Goal = not to drive strategy from µCorporate¶ (tried and failed dismally) but to interact directly with the grass roots and support their initiatives Technique = use of action labs (6 to 8 people): ± ± Week long retailing µboot camp¶. 60 day plan implementations. peer challenges. Projects spawned many more projects ‡ Guidance and nurturing came from the top. report back etc.SHELL OIL Case example: Guide Strategy-Making with a µStrategic Envelope¶ ‡ ‡ ‡ New GM believed change would only occur if he went directly to his µfront lines¶ (gas station employees). McNurlin.

: ‡ Be at the Table : ± ± ± IS executives have not always been involved in business strategising This situation is untenable in today¶s µInternet-driven¶ world. . what is taking the µold¶ approach¶s place? cont.Today¶s Sense-and-Response Approach cont. Published by Pearson Education. If yesterday¶s assumptions no longer hold true. McNurlin. Note: first = need to make department credible ‡ Test the Future ± ± ± Need to test potential futures before the business is ready for them (thinking ahead of the business) Provide funding for experiments Have an emerging technologies group 4-22 ©2006 Barbara C.

what is taking the µold¶ approach¶s place? cont. Supply Chain Management «) 4-23 ©2006 Barbara C.Today¶s Sense-and-Response Approach cont. If yesterday¶s assumptions no longer hold true. Published by Pearson Education. The most critical IT decisions are infrastructure. Recommended that IT µexperiments¶ include those that test µpainful¶ infrastructure issues such as how to:     Create and maintain common.: ‡ Put the Infrastructure in Place: ± ± ± Moving quickly in Internet commerce means having the right IT infrastructure in place. McNurlin. . consistent data definitions Create and instil mobile commercial standards among handheld devices Implement e-commerce security and privacy measures Determine operational platforms (ERP.

. 4. Stages of Growth Critical Success Factors Competitive Forces Model Value Chain Analysis E-business Value Matrix Linkage Analysis Planning Scenario Planning 4-24 ©2006 Barbara C. Published by Pearson Education.Seven Planning Techniques 1. 7. 3. 2. 6. 5. McNurlin.

Published by Pearson Education. learning period for the field ‡ Stage Three: Control: Efforts begun toward standardization ‡ Stage Four: Integration: Pattern is repeated ‡ Example (Figure 4-5): ± DP Era ± Micro era ± Network era 1960 ± early ¶80s early ¶80s ± late ¶90s late¶90s ± 2010? 4-25 ©2006 Barbara C. McNurlin.1. Stages of Growth ‡ Stage One: Early Successes: Increased interest and experimentation ‡ Stage Two: Contagion: Interest grows rapidly. .

Published by Pearson Education.©2006 Barbara C. McNurlin. 4-26 .

too much control at the learning and experimentation stage can kill of new uses of technology ‡ Management principles differ from stage to stage ‡ Different technologies are in different stages at any point in time ©2006 Barbara C.1. McNurlin. ‡ The eras overlap each other slightly at points of ³technology discontinuity´ ± Proponents of he proven old dominant design struggle with proponents of the new and unproven designs ‡ µInevitably¶ the new (proven) win out ‡ Importance of the theory is understanding where a technology or company resides on the organizational learning curve ± e. 4-27 . Published by Pearson Education. Stages of Growth cont.g.

. Published by Pearson Education.2. McNurlin. building CSFs ©2006 Barbara C. and temporal organizational factors (inventory) 4-28 ‡ Monitoring Vs. company itself and situation within industry. CSFs are the few key areas of the job where things must go right for the organization to flourish ‡ Suggested fewer than 10 per executive ‡ Time dependent (must be re-examined) ‡ Four sources: ± ± ± ± industry the business is in. environment (consumer trends). Critical Success Factors ‡ Popular planning approach that can be used to help companies identify information systems they need to develop / improve ‡ For each executive.

McNurlin. Published by Pearson Education. Critical Success Factors cont. ‡ Used to determine factors critical to accomplish corporate objectives and corresponding measures ‡ Can be used to identify IS plans that need to be developed ©2006 Barbara C.2. 4-29 .

3. . Competitive Forces Model Companies must contend with five competitive forces which you need to analyse (Figure 4-6): 1 Threat of new entrants 2 Bargaining power of customers and buyers 3 Bargaining power of suppliers 4 Substitute products or services 5 The intensity of rivalry among competitors 4-30 ©2006 Barbara C. Published by Pearson Education. McNurlin.

©2006 Barbara C. Published by Pearson Education. McNurlin. 4-31 .

Competitive Forces Model cont. Differentiate product and services .not just a lowcost producer 3.e. Find a niche . Published by Pearson Education.3.g. 4-32 . Be the lowest-cost producer .make them ³better´ in the eyes of the consumer  Probably the most popular of the 3 strategies 2. McNurlin. ‡ Three strategies for dealing with these competitive forces: 1.: geographical market ©2006 Barbara C.

Published by Pearson Education. McNurlin. . market share or revenue 4-33 ©2006 Barbara C. and Intensifies rivalry among competitors ‡ Recommend = focus on your strategic position in an industry and how you will maintain profitability ± Not growth.Framework Example Five Forces Analysis of the Internet ‡ The Internet tends to dampen the profitability of industries and reduce firms¶ ability to create sustainable operational advantages because: ± ± ± ± ± It increases the bargaining power of buyers Decreases barriers to entry Increases the bargaining power of suppliers Increases the threat of substitute products and services.

McNurlin. Published by Pearson Education. 4-34 . store. and distribute the product/service to buyers 4 Marketing and sales: the means/incentives for buyers to buy the product/service 5 Service: enhancements/maintenance of the value of the product/service ©2006 Barbara C. Value Chain Analysis ‡ Five primary activities that form the sequence of the value chain: 1 Inbound logistics: receiving and handling inputs 2 Operations: converting inputs to the product/service 3 Outbound logistics: collect.4.

‡ Four supporting activities that underlie the entire value chain: 1 2 3 4 Organizational infrastructure Human resources management Technology development Procurement ‡ ‡ Figure 4-7 Virtual Value Chains? ± Marketspaces where information substitutes for physical  Can also use Porter¶s Value chain analysis 4-35 ©2006 Barbara C.4. Value Chain Analysis cont. McNurlin. Published by Pearson Education. .

McNurlin.©2006 Barbara C. 4-36 . Published by Pearson Education.

AN AUTOMOBILE MANUFACTURER Case Example ± Virtual Value Chain ‡ The rental car subsidiary turned to auctioning off clean used cars to dealers to sell. and then place bids during the online auction. Published by Pearson Education. held once or twice a month ‡ The auction saves them time and effort. McNurlin. and the cars are guaranteed ©2006 Barbara C. via marketspace ‡ Dealers can view the cars (and their stats) to be auctioned from a screen in their dealership. 4-37 .

therefore a µportfolio¶ management approach is valuable. McNurlin. 4-38 . ‡ Tool used by Cisco to ensure they are developing a well-rounded portfolio of IT projects. ‡ Every IT project is meant to be placed into one of four categories to assess its value to the company (Figure 4-8): ± New fundamentals: Low-Low=provide a fundamentally new way of working in overhead areas.5. Published by Pearson Education. E-Business Value Matrix ‡ It can be difficult for executives to prioritise projects. not business-critical areas ± Operational excellence: High in criticality to business-Low in newness of idea=medium risk because they may involve reengineering work processes ± Rational experimentation: Low in criticality to business-High in newness of idea=test new technologies and ideas ± Breakthrough strategy: High-High=potentially have a huge impact on the company ©2006 Barbara C.

McNurlin. Published by Pearson Education.©2006 Barbara C. 4-39 .

.CISCO SYSTEMS Case Example ± E-Business Value Matrix ‡ Cisco¶s expense reporting system fits in its new fundamentals category ‡ Its executive dashboards are an example of operational excellence projects ‡ Multicast streaming video used for company meetings is a rational experiment. Published by Pearson Education. and ‡ Its development of a virtual supply chain is seen as a breakthrough strategy 4-40 ©2006 Barbara C. McNurlin.

Published by Pearson Education. 4-41 . Linkage Analysis Planning ‡ Examines the links organizations have with one another with the goal of creating a strategy for utilizing electronic channels ‡ Methodology includes the following steps: ± Define power relationships among the various players and stakeholders: ± Identify who has the power ± Determine future threats and opportunities for the company ©2006 Barbara C.6. McNurlin.

Published by Pearson Education. McNurlin. Linkage Analysis Planning cont. buyers. ‡ Map out your extended enterprise (Figure 4-9) to include suppliers. 4-42 . and present information and knowledge as part of a product or service or as an ancillary good ©2006 Barbara C. distribute. and strategic partners ± The enterprise¶s success depends on the relationships among everyone involved ± Some 70% of the final cost of goods and services is in their information content ‡ Plan your electronic channels to deliver the information component of products and services ± Create.6.

Published by Pearson Education. McNurlin. 4-43 .©2006 Barbara C.

a natural language front end for accessing ± Online information ± Expert system-based products ± e-mail facilities.Electric Power Research Institute Case example: Linkage Analysis Planning ‡ EPRI¶s challenge . Published by Pearson Education. and ± video conferencing ©2006 Barbara C.compress ³information float´ . McNurlin.elapsed time from availability research findings to the use of those results in industry ‡ Answer: EPRINET . 4-44 .

Published by Pearson Education.©2006 Barbara C. McNurlin. 4-45 .

4-46 . McNurlin. Scenario Planning ‡ Scenarios are stories about the way the world might be in the future ‡ The goal of scenario planning is not to predict the future (= hard to do!). but to explore the forces that could cause different futures to take place ‡ Then decide on actions to take if those forces begin to materialize ©2006 Barbara C.7. Published by Pearson Education.

McNurlin. ‡ Long-term planning has traditionally extrapolated from the past and has not factored in low-probability events that could significantly alter trends ± Straight-line projections have provided little help! ‡ Four steps in Scenario Planning: Define a decision problem and time frame to bound the analysis 2. Published by Pearson Education. Construct the scenarios 1. Scenario Planning cont. Identify the major known trends that will affect the decision problem 3. ©2006 Barbara C.7. 4-47 . Identify just a few driving uncertainties 4.

The main job of IS could be facilitation of knowledge processes across organizations ©2006 Barbara C. The Worknet Enterprise scenario could occur if companies outsource management of their data and share it extensively with specific partners 3. The Firewall scenario could occur if companies use traditional forms of management and see their data as proprietary 2. McNurlin.CASE EXAMPLE Scenarios on the Future of IS Management ‡ ‡ What will IS management look like in 10 years? Four potential futures are presented: 1. 4-48 . The µTecknowledgy¶ scenario could occur if there is an open information society where any kind of information is available for a price. The Body Electric scenario could occur if new organizational forms flower (such as people owning parts of work cells in which they work) and obtain all their IT from interconnected service providers 4. Published by Pearson Education.

4-49 . McNurlin.Scenario Planning ©2006 Barbara C. Published by Pearson Education.

Published by Pearson Education. IS plans must look towards the future  Future is not likely to be an extrapolation of the past  Successful planning needs to support ³peering into the future´ ± most likely in a sense-andrespond fashion ©2006 Barbara C. 2. McNurlin. IS planning must be intrinsic to business planning 4-50 .Conclusion ‡ Based on the successes and failures of past information systems planning efforts. we see two necessary ingredients to a good strategic planning effort: 1.

McNurlin. 4-51 . ‡ IS plans typically use a combination of planning techniques presented ± No single technique is best and no single one is the most widely used in business ‡ Sense-and-respond is the new strategymaking mode ± Creating an overall strategic envelope and conducting short experiments within that envelope. Published by Pearson Education. moving quickly to broaden an experiment that proves successful ©2006 Barbara C.Conclusion cont.

Conclusion ³Peering into an unknown future´ ©2006 Barbara C. Published by Pearson Education. McNurlin. 4-52 .

McNurlin.PART I Discussion Case IT Strategy for Royal Dutch/Shell Group ©2006 Barbara C. Published by Pearson Education. 4-53 .

©2006 Barbara C. 4-54 . McNurlin. Published by Pearson Education.